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The FAANG team of mega cap stocks developed hefty returns for investors throughout 2020. The team, whose members consist of Facebook (NASDAQ:FB), Amazon.com (NASDAQ:AMZN), Apple (NASDAQ:AAPL), Netflix (NASDAQ:NFLX) and Alphabet (NASDAQ:GOOGL) benefited vastly from the COVID-19 pandemic as men and women sheltering into position used the devices of theirs to shop, work and entertain online.

During the past year alone, Facebook gained thirty five %, Amazon rose seventy eight %, Apple was up eighty six %, Netflix discovered a sixty one % boost, along with Google’s parent Alphabet is actually up thirty two %. As we enter 2021, investors are wondering if these tech titans, enhanced for lockdown commerce, will achieve very similar or even a lot better upside this year.

By this particular number of five stocks, we’re analyzing Netflix today – a high performer throughout the pandemic, it’s today facing a distinctive competitive threat.

Stay-at-Home Appeal Diminishing?
Netflix has been one of the strongest equity performers of 2020. The business and its stock benefited from the stay-at-home environment, spurring demand due to its streaming service. The stock surged aproximatelly ninety % off the minimal it hit on March sixteen, until mid-October.

NFLX Weekly TTMNFLX Weekly TTM
But, during the past three weeks, that rally has run out of steam, as the company’s main rival Disney (NYSE:DIS) received a great deal of ground in the streaming battle.

Within a year of its launch, the DIS’s streaming service, Disney+, today has greater than eighty million paid subscribers. That’s a significant jump from the 57.5 million it reported in the summer quarter. Which compares with Netflix’s 195 million members as of September.

These successes by Disney+ came at the identical time Netflix has been reporting a slowdown in the subscriber growth of its. Netflix in October reported it added 2.2 million subscribers in the third quarter on a net basis, short of the forecast of its in July of 2.5 million brand new subscriptions for the period.

But Disney+ isn’t the only headache for Netflix. AT&T’s (NYSE:T) WarnerMedia division is in the midst of a comparable restructuring as it concentrates on the new HBO Max of its streaming platform. As well, Comcast’s (NASDAQ:CMCSA) NBCUniversal is realigning its entertainment businesses to give priority to its new Peacock streaming service.

Negative Cash Flows
Apart from rising competition, what makes Netflix much more weak among the FAANG group is the company’s tight money position. Given that the service spends a great deal to develop its extraordinary shows and shoot international markets, it burns a good deal of money each quarter.

In order to improve the cash position of its, Netflix raised prices due to its most popular program throughout the last quarter, the second time the company has done so in as many years. The action might prove counterproductive in an atmosphere where folks are losing jobs as well as competition is heating up. In the past, Netflix priced hikes have led to a slowdown in subscriber growth, particularly in the more mature U.S. market.

Benchmark analyst Matthew Harrigan previous week raised similar issues in his note, warning that subscriber advancement may well slow in 2021:

“Netflix’s trading correlation with other prominent NASDAQ 100  and FAAMG names has now clearly broken down as 1) belief in the streaming exceptionalism of its is fading relatively even as 2) the stay-at-home trade might be “very 2020″ even with a little concern over how U.K. and South African virus mutations might affect Covid-19 vaccine efficacy.”

The 12-month cost target of his for Netflix stock is $412, aproximatelly 20 % beneath the current level of its.

Bottom Line

Netflix’s stay-at-home appeal made it both one of the best mega caps as well as tech stocks in 2020. But as the competition heats up, the business must show that it continues to be the high streaming choice, and it is well-positioned to protect the turf of its.

Investors appear to be taking a rest from Netflix stock as they delay to see if that will happen.

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